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FDIC Deposit Insurance—Are Your Accounts Protected?

The FDIC insures deposits up to $250,000. ©iStockphoto.com/csdesigns

More than 450 banks in the United States failed and were closed by the Federal Deposit Insurance Corporation (FDIC) from the 2008 peak in financial crisis on through 2012. Yet, no one with FDIC-insured deposits in those banks lost money due to those failures. In fact, according to the FDIC, "no depositor has ever lost a single penny of FDIC-insured funds" since the creation of the FDIC in 1933.

The money you deposit in a bank account is insured by the FDIC, an independent agency of the U.S. government. There's comparable protection for deposits at credit unions from the National Credit Union Share Insurance Fund.

Your deposits are currently secure up to $250,000 even if your bank or credit union goes out of business. But here's a key point: this coverage applies separately to each bank where you have accounts.

Deposit Insurance Coverage

The exact amount of insurance you're entitled to at each bank depends on two factors—the kinds of accounts you have and the way those accounts are registered. Coverage applies to:

•  Single accounts. Your total deposits in all the checking and savings accounts you own solely in your own name at one bank are insured up to $250,000.

•  Joint accounts. Your total share of all checking and savings accounts you own jointly with others is insured up to $250,000. For example, if you own a half-share of an account with another that has a balance of $500,000, the entire amount is insured.

•  Self-directed retirement accounts. The balances in your self-directed retirement accounts (such as IRAs) are insured up to $250,000 at the same bank, if the money is in certificates of deposit or other bank accounts. Add up the balances of these accounts and if the sum is $250,000 or less you're covered.

•  Revocable trust accounts. Each account (including accounts that are payable upon death and living trusts) that names a different beneficiary is insured up to $250,000.

Are My Accounts Insured?

Here's how this works. Assume that you have the following accounts at one particular bank:

•  $5,000 in a checking account plus $245,000 in various savings accounts held in your name,

•  $200,000 in a savings account you jointly own with another person,

•  $250,000 in certificates of deposit held in an IRA, and

•  $200,000 in two payable-on-death trust accounts with different beneficiaries.

The FDIC insurance protects all your deposits because each account is covered and the amount deposited does not exceed $250,000.

The answer is different if you owned a bank CD in your name valued at $300,000. FDIC insurance would cover $250,000 and $50,000 would be uninsured. If you split that CD investment into separate CD accounts at two banks, say $250,000 at one and $50,000 at another, the entire $300,000 would be insured.

FDIC insurance coverage gives you the flexibility to open similar accounts at different banks to make sure all of your money is insured.

What Deposit Insurance Doesn't Cover

FDIC insurance does not cover investment or insurance products that banks can offer. This means that coverage is not available for stocks, bonds and mutual funds held in a bank IRA account. They can lose value. FDIC insurance also does not cover life insurance and annuities.

For more information about bank products, visit www.finra.org.

FINRA is the largest independent regulator for all securities firms doing business in the United States. Our chief role is to protect investors by maintaining the fairness of the U.S. capital markets. FINRA does not endorse, sponsor, or guarantee, nor is it sponsored by, any advertisers on this site, and any dealings with those advertisers are solely between you and the advertisers.